Question I received a offer from my credit card company for a personal loan at a fixed apr of 6.9% with loan term of 60 months for $20,000 with monthly payment being $396 a month for life of the loan. This sounds pretty good to me, what would be the drawbacks, if any, to getting a loan like this verses using your local bank? This amount could pay our home off, and beats the annual renewal rate we get at the bank now that is a variable rate.
Answer Hi,
If you are using the proceeds mainly to pay your home off, then its a good deal, especially if the rate is fixed/locked in AND you can pay it off early if you wish.
Why? Because you can obtain a home equity loan for at least that amount and even lower interest, with even better repayment terms -- especially if your house is paid off and there are no other loans on the property. Get a home equity loan, then pay off the credit card loan. Interest is deductible too.
Some folks will even parlay repeated payoffs into better and better rates, e.g, going back to the card company asking for an even lower rate as a 'good customer' then paying off the equity line, and going back and getting an even better rate from the home equity line producer after using the lower rate credit card loan to pay it off again. I've seen people do this and end up with a loan with almost no interest.
But if you just want to get the card loan and payoff the house, this is a good rate. Just be sure to read the fine print on your loan documents. That's a lot of debt to carry on a credit card, regardless of how low the main rate is.
